October 9, 2008 / 7:56 PM / 11 years ago

UPDATE 2-Mexico's Cemex tumbles on peso, derivatives

(Recasts with company reaction, previous MEXICO CITY)

By Robin Emmott and Gabriela Lopez

MONTERREY, Mexico, Oct 9 (Reuters) - Mexico’s Cemex, the world’s No. 3 cement company, warned on Thursday its derivatives position slid into negative territory as its share price collapsed and investors panicked about the company’s outlook.

But the Monterrey based-company CMXCPO.MX (CX.N) tried to assuage fears, saying it has sufficient cash to meet all operating and financial requirements.

“We continue to employ derivatives only to execute our financing plan and to partially hedge our capital investment in our foreign subsidiaries,” Cemex said in a statement.

Cemex said the current value of its derivatives position had fallen to negative $500 million from positive $100 million at the end of September because of market volatility.

Cemex, which will report its third-quarter results on Oct. 21, faces investor worries that its exchange-rate and interest-rate derivative positions are vulnerable to a weaker peso.

Shares in Cemex fell 15.16 percent on Thursday as investors panicked about a bank downgrading its outlook and the possibility that a weaker peso would affect Cemex results.

Shares of the company, which has big U.S. operations that have been hit by the collapse of the U.S. housing market, lost 1.88 pesos to 10.50 pesos. Earlier in the day, trading in the stock was briefly suspended.

Cemex shares in New York closed down 19.27 percent to $8.17, although they ticked up in after hours trading to $8.50.

“There is a huge amount of nervousness about the stock, with concerns that a depreciation in the peso will hurt the company’s earnings,” said Francisco Chavez, an analyst at BBVA Bancomer.

“The company had an exchange rate of 10.6 pesos (to the dollar) in its September guidance, and now we are looking at the peso of 12.5,” he said.

In its statement, the company said it had slightly exceeded its guidance for the third quarter and has cut its net debt to $16.4 billion from $17.6 billion.

The yield on Cemex’s five-year credit default swaps surged on Thursday, suggesting investors believe the company could have a hard time making debt payments.

Cemex has $7 billion in debt payments due next year and although it will make the payments, they will be more costly, analysts say.

Also hurting the shares, Citigroup cut its rating on Cemex stock on Thursday, citing concerns about U.S. economic growth.

Credit Suisse also cut its American Depositary Receipt (ADR) 12-month target price for Cemex to $14 from $20.

Credit Suisse said Cemex may face a ratings downgrade on its debt. (Additional reporting by Robert Campbell, Michael O’Boyle and Noel Randewich in Mexico City; Editing by Bernard Orr)

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